In trying to explain IPO underpricing, Loughran and Ritter (2002, RFS) suggested that CEOs may not be concerned about leaving money on the table in IPOs because the losses are netted against the rises in stock price in the secondary market.
Ljunqvist and Wilhelm now test this and find that it seems to hold. How do they do this?
From my class notes:
"Let's talk about grocery stores for a while.
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